The high cost of energy was one of the reasons given by Tata Steel for its decision to sell off its UK interests. Now the government is under pressure to lower energy costs as part of a deal to find a buyer for the Tata plant in Port Talbot. And Tata is not the only business raising concerns about high energy costs hampering growth according to EFF the Manufacturers Organisation.
The steel industry is just one of a number of energy intensive industries that currently pay around £390m a year in energy costs. These costs hampering profitability and, as with steel, could result in the collapse of strategic industries in the UK. As EEF’s chief executive Terry Scuoler explains:
“A system of permanent exemption from energy policy costs is the only long term solution that can provide these sectors with that crucial sense of certainty that is so important for future investment decisions. This is something the current system of compensation payments will struggle to do to the same degree.”
This sentiment will be a headache to government, whose energy policy is based on energy customers meeting the investment costs for new gas, nuclear and renewable generation. If large businesses cannot afford their share of the costs, either government will have to find the shortfall from general taxation (which it opposes ideologically) or the price of energy to ordinary consumers will have to rise significantly (which could well amount to electoral suicide).